Duff on Hospitality Law

Dan focuses his practice on bankruptcy, insolvency, creditors’ rights, and complex commercial litigation. He maintains an active practice in both Washington and California, and serves clients across many key industries, with ...

Regular readers of this blog will know that we have been following the development and implementation of the FDA’s new menu-labeling regulations with some interest. After multiple rounds of drafts and public comment periods, the agency now has issued its final guidance for compliance with the new rules. According to the FDA’s press release, the guidance is intended to respond to the most frequently-asked questions from business potentially subject to the new rules, and “differs from the draft guidance by providing additional examples and new or revised questions and answers on topics such as covered establishments, alcoholic beverages, catered events, mobile vendors, grab-and-go items, and record keeping requirements.”

Nevertheless, the final guidance does not appear to substantively change the prior drafts insofar as the hospitality industry is concerned. Perhaps most noteworthy to hotel owners and operators is that the FDA has maintained the position, described in the earlier draft guidance, that a hotel’s complimentary breakfast would not be considered food offered for sale and thus would not be subject to the menu-labeling requirements.

As before, that guidance comes with the caveat that it merely reflects the “current thinking” of the FDA and does not establish binding rights or duties. Thus, while the guidance may be called “final,” the agency’s “current thinking” could always shift as the regulations – which are set to take effect in May 2017 – begin to be enforced. Which might lead one to wonder, what’s in a label, anyway? Only time will tell.

After surviving its first go-around in court, New York City’s attempt to require restaurateurs to add sodium warnings to their menus has hit a roadblock in the form of a temporary injunction.

Perhaps taking inspiration from the FDA’s recent imposition of nutrition-labeling requirements on restaurant menus, the New York City Board of Health had approved a menu-labeling regulation of its own this past December. Under the regulation, the New York City Health Code was amended to require “Food Service Establishments” (or “FSEs”) to post salt-shaker icons on their menus next to any food item containing more than 2,300 milligrams of sodium – the FDA’s recommended daily allowance of the delicious mineral. The regulation also requires FSEs to include a statement on their menus that “[h]igh sodium intake can increase blood pressure and risk of heart disease and stroke.”

Since their official unveiling in December 2014, the FDA’s final menu-labeling rules have given rise to a multitude of questions from hospitality businesses who wonder how to comply or whether they must comply at all. The FDA, in turn, appears to be trying its level best to provide enough time and guidance to ease these businesses’ transition to the new rules. First, the FDA extended the deadline for compliance by a full year from December 1, 2015 to December 1, 2016, citing the agency’s extensive dialogue with chain restaurants, grocery stores, and other members of the hospitality industry.

What is the impact of the FDA’s New Food-Labeling Regulations? The new rules cover any restaurant or “retail food establishment” selling “restaurant-type food.” Does that include the wide array of retail and hospitality businesses, including bakeries, cafeterias, coffee shops, convenience stores? Dan Vecchio, a litigator in our Seattle office, has been watching the latest developments. As our guest author today, Dan can shed his insights on how these new regulations might affect hoteliers and restaurateurs. Thank you for today’s post, Dan! - Greg

In the spirit of the giving season, the FDA has finally issued its long-awaited final rules on menu labeling, which had languished in draft form for several years. But for many hospitality businesses, the agency’s year-end gift is little more than a lump of coal. That is because when the rules go into effect on December 1, 2015, they will require restaurants, hotels, and other sellers of “restaurant-type food” to provide nutrition information for the items on their menus, closing what the FDA perceived as a “regulatory gap” in the food-labeling sphere.

The new rules apply primarily to chain or franchise establishments (although the FDA is quick to point out that other businesses may voluntarily opt in if desired)! Specifically, the rules cover any restaurant or “retail food establishment” that is part of a chain of twenty or more locations doing business under the same name, serving substantially similar food items at each location. Sounds simple enough, but it is the FDA’s definition of “restaurant” that has caused considerable heartburn. In the view of the agency, a restaurant can be any one of a wide array of retail and hospitality businesses, including bakeries, cafeterias, coffee shops, convenience stores, delicatessens, bowling alleys, amusement parks, grocery stores, fast food restaurants, table service restaurants, or any establishment offering for sale what the FDA has helpfully dubbed “restaurant-type food.”

What is “restaurant-type food,” exactly? According to the new rules, it is food that is usually eaten at the restaurant, or while walking away, or “soon after arriving at another location,” and is either sold for immediate consumption or is ready-to-eat somewhere else. In other words, whether it’s take-out, dine-in, or maybe a deli sandwich for dinner tonight, the rules will apply.

So, what makes a restaurant part of a chain? According to the agency, it must be doing business under the same name (or a substantially similar name, such as “Restaurant” and “Restaurant Express”) as at least nineteen other locations, and must serve the same or substantially similar menu items. “Locations” include restaurants within other facilities, and indeed multiple restaurants within the same building (a mall, for example) are counted individually. If the restaurant has no name of its own – for example, a cafeteria in an office building or an unnamed hotel café – then the restaurant is considered to be doing business under the name of its parent entity. So, that means that if each of a hotel’s twenty or more locations has an identically-named or unnamed restaurant (including the one providing room service), the rules will apply to them. On the other hand, the rules would not apply to a hotel restaurant if it has its own unique name.

To comply with the rules, businesses must include calorie and other nutrition information on their menus, menu boards, signs adjacent to the food, or the like – essentially, wherever the standard food items and prices are listed. They also must print a “succinct statement” informing customers of the recommended daily caloric intake for adults or children, depending on the menu’s target audience. Restaurants also must keep nutrition information for their standard fare on hand in case it is requested by a customer – and the restaurant must note on the menu that such information is available.

Failing to adhere to the rules is sure to cause quite the bellyache, as well. In response to public comments, the FDA noted that any person exercising authority and supervisory responsibility over a restaurant or similar retail food establishment could be liable for a violation. That could mean that even the owner of a single franchise could get his or her goose cooked if that location isn’t up to snuff.

If there is any silver lining for the hotel industry, though, it is that these rules today don’t apply to alcoholic beverages that are “food on display” and not self-service, such as those bottles of liquor behind the hotel bar. Of course, any drinks that are listed as standard menu items still will need to be labeled. Bon appétit!

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Greg Duff, EditorGreg Duff founded and chairs GSB’s national Hospitality, Travel & Tourism group. His practice largely focuses on operations-oriented matters faced by hospitality industry members, including sales and marketing, distribution and e-commerce, procurement and technology. Greg also serves as counsel and legal advisor to many of the hospitality industry’s associations and trade groups, including AH&LA, HFTP and HSMAI.